Successfully managing personal credit is a big issue with many consumers. Specifically, consumers often lack the discipline to spend less than they earn. When consumers spend more than they earn, they take on debt. If debt payments are missed, a consumer's credit rating may be adversely impacted. Many times, a consumer lacking disciplined spending habits spends cash on hand rather than commit the money to reduce an existing debt with a creditor. For example, a person may have an existing balance on his credit card. If that person works, he receives a paycheck periodically. Each paycheck reflects the consumer's net pay, which is his gross wages less any legacy withholdings. Examples of legacy withholdings include, but are not limited to, federal tax, health insurance premiums, 401(k), child support, and union dues. When the consumer receives his net pay, he often spends it rather than use some of the net pay toward the existing balance with his creditor.
Alternatively, while the consumer may genuinely want to reduce his debt amount and/or term of the debt to his creditor, the consumer may lack the sophistication to determine the best way to achieve this goal given his income and other financial obligations. For example, a consumer with a credit card balance may be making minimum monthly payments, which extends the terms of the debt. The consumer may benefit from the knowledge that a different credit card company would allow the consumer to transfer his entire balance and receive a lower interest rate, effectively reducing the term of the debt. As another example, the consumer may benefit from the knowledge that, by paying 110% of the minimum monthly payments, the term of the debt may be reduced by two years. In other words, the term and/or the amount of a consumer's debt are often extended because the consumer is not disciplined and/or educated enough to manage the money he has before he decides to spend it.